Markets are forward-looking
LPL Financial analyzed 25 major geopolitical episodes, dating back to Japan’s 1941 attack on Pearl Harbor. “Total drawdowns around these events have been fairly limited,” Jeff Buchbinder, LPL’s chief equity strategist, wrote in a research note on Monday. (Full recoveries often “take only a few weeks to a couple of months,” he added.)
Deutsche Bank analysts drew a similar conclusion: “Geopolitics doesn’t normally matter much for long-run market performance,” Henry Allen, a markets strategist, wrote in a note on Monday.
Here is the NYT piece, via the excellent Kevin Lewis.
Bordeaux observations
The central core is one of the most consistent eighteenth century cities you will find in Europe. Until the visit, my first there, I had not realized how much of the town’s growth came during that time, in part because of some special trade privileges, and in part because of the slave trade. Here is some 18th century economic history of Bordeaux. The central plazas and radiating streets are splendid, as is the large Girondins monument nearby.
The main museum is subpar, with some good Redons (he is from there), and the main church is pretty good but excelled by other locales. In this sense there is not much to do in Bordeaux. There is, however, some good modern and also brutalist architecture near and across the main river bank. Check out this bridge. I enjoyed these creations, as they injected some element of surprise into my visit.
You can still get an excellent meal at the nearby country chateaus, but if you just stop for normal French food in the town it is pretty mediocre, not better than say WDC. The classic French food traditions are moving more and more into corners of the country, and away from everyday life.
Typically I am surprised by how normal France feels. People want to say “The French this, the French that…” but to me they are fairly Americanized, often speak good English, and have few truly unique cultural habits these days. They also seem reasonably well adjusted, normal mostly in the good sense, and thus of course somewhat boring too.
Walking and driving through the less salubrious parts of town is a useful corrective, but I do not feel the place is falling apart. And the best estimates are that six to nine percent of the city is Muslim, hardly an overwhelming number.
I learned just before leaving that Kevin Bryan was in town too, here are his observations. Bordeaux is certainly worth visiting, but I also am not surprised it is the last major French city I have been to in my life.
Practice what you preach
From the University of Barcelona:
Master’s Degree in Political Ecology Degrowth and Environmental Justice
By the way, the web site uses cookies.
Alfred Brendel, RIP
His Haydn piano sonatas were his best work and also they were pathbreaking in helping us understand that composer. I also very much appreciated his short Beethoven pieces on the old Vox box set, starting with the Bagatelles, and as a live performer his Schubert was memorable…
Tuesday assorted links
The Deadly Cost of Ideological Medicine
Excellent Megan McArdle column in the Washington Post tracing how we have swung from one form of insanity on vaccine policy to another with barely a pause in between:
In more than 20 years of covering policy, I have witnessed some crazy stuff. But one episode towers above the rest in sheer lunacy: the November 2020 meeting of the CDC’s Advisory Committee on Immunization Practices. Sounds boring? Usually, maybe.
But that meeting was when the committee’s eminent experts, having considered a range of vaccine rollout strategies, selected the plan that was projected to kill the most people and had the least public support.
In a survey conducted in August 2020, most Americans said that as soon as health-care workers were inoculated with the coronavirus vaccine, we should have started vaccinating the highest-risk groups in order of their vulnerability: seniors first, then immunocompromised people, then other essential workers. Instead of adopting this sensible plan, the Centers for Disease Control and Prevention advisory committee decided to inoculate essential workers ahead of seniors, even though its own modeling suggested this would increase deaths by up to 7 percent.
…Why did they do this? Social justice. The word “equity” came up over and over in the discussion — essential workers, you see, were more likely than seniors to come from “marginalized communities.” Only after a backlash did sanity prevail.
…That 2020 committee meeting was one of many widely publicized mistakes that turned conservatives against public health authorities. It wasn’t the worst such mistake — that honor belongs to the time public health experts issued a special lockdown exemption for George Floyd protesters. And of course, President Donald Trump deserves a “worst supporting actor” award for turning on his own public health experts. But if you were a conservative convinced that “public health” was a conspiracy of elites who cared more about progressive ideology than saving lives — well, there was our crack team of vaccine experts, proudly proclaiming that they cared more about progressive ideology than saving lives.
This is one of the reasons we now have a health and human services secretary who has devoted much of his life to pushing quack anti-vaccine theories.
I recall this episode well. Nate Silver and Matt Yglesias deserve credit for publicizing the insanity and stopping it–although similar policies continued at the state level.
An addendum to the German fiscal austerity debates
“There is a significant risk that France will be passed by neighbouring countries like Germany and Poland, who are working hard to increase military spending quickly,” said Tenenbaum.
That is from the FT. I am far from convinced that Germany will use its fiscal freedom wisely to protect its national and also European security. Still, I am glad they have this option, and in a pinch probably they would do what is necessary.
We can all agree that fiscal policy should be relatively tight in good times, all expected values taken into account, and looser in bad times. The underdiscussed issue is exactly which times are “the good ones,” and perhaps the next ten years is when the fiscal space truly will be needed. Such an on line, pile it on, dogmatic critical slaughter of Germany and Merkel was attempted when the eurocrisis hit, and so I fear many people will be reluctant to recognize the possible truth of this point. But war is so, so much worse than the other bad world-states, and that is the one you really need to be prepared for. Of course the ideal thing would have been for Merkel to boost defense spending back then, but only rarely was that the demand.
New U.S. Corporate Tax Reform Evidence
The Tax Cuts and Jobs Act of 2017 (TCJA) marked the first time in three decades that material changes were made to the corporate tax code of the United States. We use TCJA as a quasi natural experiment to estimate the impact of changes in user cost of capital on investment. Following the method of Auerbach and Hassett (1991), using cross-sectional data we find that the user cost is associated with higher rates of investment consistent with previous studies. BEA asset types with greater reductions in user cost of capital and marginal effective tax rate (METR) after the 2017 TCJA had greater statistically significant increases in their investment rates several years after the tax reform. Specifically, we find the magnitude of a 1 percentage point decrease in user cost is associated with a 1.68 to 3.05 percentage point increase in the rate of investment, larger than prior estimates of the responsiveness of investment with respect to user cost of capital.
That is from a new NBER working paper by
Annie Lowrey on ranked choice voting as a form of democracy
Seeing a no-name upstart attempt to upset a brand-name heavyweight is thrilling. But the system has warped the political calculus of the mayoral campaign. Candidates who might have dropped out are staying in. Candidates who might be attacking one another on their platforms or records are instead considering cross-endorsing. Voters used to choosing one contender are plotting out how to rank their choices. Moreover, they are doing so in a closed primary held in the June of an odd year, meaning most city residents will not show up at the polls anyway. If this is democracy, it’s a funny form of it…
Whether Cuomo or Mamdani wins this month, New Yorkers might have another chance to decide between them. After this annoyingly chaotic primary, we could have an annoyingly chaotic election: If Mamdani loses, he might run in the general on the Working Families Party ticket. If Cuomo loses, he might run in the general as an independent, as will the disgraced incumbent, Eric Adams. At least, in that election, voters won’t be asked to rank their favorite, just to pick one.
Here is the full piece. I do not myself see a big advantage from this system.
Monday assorted links
1. On Amy Coney Barrett (NYT).
3. A creative solution to the California housing problem.
4. A new non-opioid pain killer? (New Yorker)
5. “In the Indian context, childlessness accounts for only 6% of the difference between high-fertility and below-replacement districts.” It explains 38% of that difference in the “advanced economies” in the sample.
6. Leonard Lauder, RIP (NYT).
Rebuild the Elites
Nature’s list of the top research universities in the world.
The U.S. seems intent on tearing down its own elites. Yes, they’ve been smug shits at times and deserve a rap on the knuckles—but our elites compete on the world stage. Gutting top universities rewards with a momentary dopamine hit, but unless we rebuild stronger institutions, we’re weakening ourselves globally. While we fight culture wars, China builds capacity. The goal shouldn’t be to destroy American elites, but to bring them back into the populist fold—to make Harvard and MIT feel like engines of American greatness again, not alien fortresses.
See yesterday’s post on the American Model for a case in point.
FYI, other sources do not rank Chinese universities quite so highly but they all acknowledge rising quality.
Hat tip: Matthew Yglesias.
English translation of the Morris Chang memoir
This is an unofficial, non-commercial translation of Morris Chang’s memoir, shared for educational and entertainment purposes only. Full disclaimer below.
Here it is, by Karina Bao.
My 2018 Politico piece on whether we are descending into fascism
In 2018 I published an article in Politico, arguing that fascism would not come to America. In part that is because of our very long democratic traditions (much longer than Weimar!), and in part because American bureaucracy has become unmanageable, thus limiting the power of the executive. DOGE in particular has been a quite vivid representation of the latter point, as I made it in 2018 — “The net result is they simply can’t control enough of the modern state to steer it in a fascist direction.”
A few people have asked me to revisit that prediction, and frankly I think it is looking great. (I do not doubt, however, that the Trump administration represents a major increase in blatant corruption, and a deterioration of norms of governance, most of all in the areas of public health and science but not only. I think of America as evolving back to some of its 19th century norms, and often bad ones, not fascism.)
Noah Smith wrote recently:
Trump is cosplaying as a dictator. But so far he’s backed down on: * tariffs * ICE sweeps * Abrego Garcia * Greenland/Canada/Panama * Ukraine aid * DOGE He does care about public opinion, a lot.
Here is Noah’s longer essay.
Here is a recent NYT headline: “Trump Loses Another Battle in His War Against Elite Law Firms.” The judiciary has stood up to Trump firmly, and he has backed down. The Army parade, by the way, was mostly pathetic and hardly served as a call to fascist arms. The Kennedy Center is not the new Haus der Kunst.
It was some while back that Trump pulled the nomination of Stefanik to be UN ambassador, on the grounds that the Republican margin in the House was extremely thin. All I can say is that Hitler would have done it differently.
Updating our views of nuclear deterrence, a short essay by o3 pro
I asked o3 pro how very recent events should update our perspectives on Schelling’s work on nuclear deterrence. I asked for roughly 800 words, here is one excerpt from what I received:
…Deterrence models that ignore domestic legitimacy under‑predict risk‑taking.
6. The United States is both referee and participant
American destroyers shooting down Iranian missiles create a blended deterrence model: extended defense. That blurs the line between the traditional “nuclear umbrella” and kinetic participation. It also complicates escalation ladders; Tehran now weighs the prospect of an inadvertent clash with the U.S. Fifth Fleet every time it loads a Shahab‑3. The war thus updates Schelling’s idea of “commitment” for the 21st‑century alliance network: digital sensors, shared early‑warning data, and distributed interceptors knit allies into a single strategic organism, reducing the freedom of any one capital to de‑escalate unilaterally.
7. Lessons for non‑combatant nuclear states
New Delhi and Islamabad will notice that an opaque Israeli arsenal backed by high‑end defenses delivered more bargaining power than Iran’s half‑finished program. Pyongyang may conclude the opposite: only a tested, miniaturized warhead guarantees respect. Meanwhile European leaders should ponder how much of their own deterrent posture rests on aging U.S. missiles whose effectiveness presumes no adversary fielding Israel‑grade intercept layers. The Israeli‑Iranian conflict is therefore less a regional exception than a harbinger.
Here is the full “column.”
Some northern parts of Spain
Salamanca still feels part of the orbit of Madrid, but León does not. Many of the faces are more Celtic, and the mood of the city can be drab in an eastern European way. Deindustrialization can be observed. It is a real city, not much dependent on tourism, though the cathedral is one of the most beautiful in Europe.
Santander, a beach town, was much nicer than expected. There is not much to do there, but it reminds me of how perhaps Nice might have been in 1974. Fully for tourists, but somehow not very touristy? And thus extremely pleasant and charming. Places like that barely exist any more. They are either quite obscure, such as Durango, Mexico, or they are overwhelmed by tourists. Seafood was excellent, and it is a much larger city than I was expecting. Nice promenades on the water.
Hondarribia is a Basque town and fishing village that feels like it should be its own country. The half-timbered homes and unusual colors set it apart from anywhere else in Europe I have been. Small, one day there is fine, but one of Europe’s best undervisited locales?
